from the look-at-that dept

Over the last few months, you may have noticed that ASCAP, BMI and the various music publishers have been pushing strongly to end the so-called "consent decree" around music publishing. This was an agreement from 1941 (and reviewed in 2001) limiting how performance rights organizations like ASCAP and BMI could act, given their position as a somewhat natural monopoly over the compositions they represented. The idea was to stop those companies from holding those works hostage -- which is why there are things like rate setting procedures by the Copyright Royalty Board. Now, we have our problems with the CRB and the rate setting process, but there is a very real fear that ASCAP, BMI and others would make music streaming prohibitively expensive if given the chance. The whole focus on getting rid of the consent decree is to try to remove any effort to block them from jacking up their prices to ridiculous rates.

The attempt to ditch the consent decree seemed especially odd, given that just months earlier, a court had called out the clear collusion by ASCAP and a bunch of music publishers to try to artificially jack up Pandora's rates. The details were a little convoluted, but basically certain publishers "withdrew" certain music from ASCAP, claiming they wanted to negotiate directly with Pandora. They didn't negotiate in good faith, and basically waited right up until the deal was about to expire. They then refused to even name what songs would no longer be covered, leaving Pandora at a very real risk of streaming songs it no longer had the right to (without even knowing which songs were being "pulled.") Because of this, Pandora was forced to sign exorbitantly high rates, which ASCAP and others then used to try to get even higher rates for others. It was clearly collusion, because while ASCAP should have been upset about publishers withdrawing music, it clearly was not. Furthermore, there were clear discussions between ASCAP and the publishers about all of this.

The end result of that case was that ASCAP lost its attempt to really jack up rates to Pandora much higher, but many people wondered how ASCAP could get away with doing that without any sort of punishment. Well... new reports say that the Justice Department is
investigating ASCAP, BMI, Universal Music Publishing and Sony/ATV over possible collusion. This is being done as part of the DOJ's review of the consent decree, but ASCAP's decision to attack the consent decree right after a court called it out for collusion may backfire badly:

The CID requests are seeking documentation across a lot of particulars, including the effect of the consent decrees on rates, whether partial withdrawals of digital rights should be allowed, and plans to license other rights beyond the public performance rights that PROs handle today. However, a memo obtained by Billboard that was sent to employees by ASCAP senior VP of legal Richard Reimer began by noting that the CID is connected to the DOJs review of the consent decree. And, as a possible reminder to be careful of what you wish for, the DOJ is also investigating of alleged coordination among ASCAP, BMI, Sony/ATV Music Publishing, and Universal Music Publishing Group.

That aspect of the DOJ investigation was mentioned in a note to ASCAP employees telling them to "preserve all documents, whether in paper or electronic format, on all the CID-related topics."

In the Billboard article, the publishers and ASCAP insist they're not worried about all of this because they believe the judge in the Pandora rate setting case "got it wrong." That's quite a bit of hubris to have, given all of the evidence of collusion that was presented in that case. It seems quite possible that rather than ending the consent decree, as ASCAP and publishers would like, the DOJ may actually come down on all of them for some fairly serious antitrust problems.

The USTR had just launched a new website with promises of transparency, and we all know how that went. Also, the Supreme Court had just announced that it would hear the Bilski case, giving it a chance to rule firmly on the question of software and business model patents — which it decided not to do, offering an extremely narrow ruling instead.

Over half a millennium ago, in a wonderful and timeless act of innovation, a friar distilled the first-ever batch of Scotch whisky at the Lindores Abbey in Scotland. The order came down this week, on June 1st 1495, from the Exchequer Rolls of Scotland, along with the necessary supplies: "To Friar John Cor, by order of the King, to make aqua vitae, VIII bolls of malt."

from the mafioso-techniques dept

Last month, we wrote about the rate court fight between ASCAP and Pandora as ASCAP attempted to massively increase Pandora's rates through moves that were quite clearly collusive. ASCAP had already lost an earlier ruling showing that it had violated its consent decree by letting publishers selectively remove certain works in order to force Pandora into paying much, much higher rates. However, the details of ASCAP and the publishers' deception became much clearer during the rate court battle. Last week, the judge handed ASCAP a huge loss, keeping the rate where it had been, at 1.85%, rather than jacking it up to ASCAP's requested 3%.

The ruling clearly highlights just how obnoxious the publishers and ASCAP acted throughout this process, and how their actions not only were intended to harm Pandora, but also the very songwriters that ASCAP pretends to represent. ASCAP has done an amazing propaganda job of pretending that it's always looking out for songwriters -- when the simple fact is that it focuses on benefiting its giant publishers, often at the expense of songwriters. The key issue in this whole action was how ASCAP allowed publishers to selectively "withdraw" their rights from ASCAP and then effectively hold a gun to Pandora's head, saying that if Pandora didn't accept a new license directly with those publishers, it would be infringing (to make this work, the publishers also refused to even let Pandora know which songs had been withdrawn). ASCAP effectively encouraged this to happen, knowing that it could use this to jack up its own rates, even though, on its face, publishers withdrawing rights from ASCAP should be seen as bad for ASCAP. But withdrawing from ASCAP (even though ASCAP effectively encouraged it) is also bad for songwriters because the publishers aren't exactly good at paying songwriters (shocking), whereas at least ASCAP has some level of transparency. Even the judge highlighted the songwriters and publishers' interests here were not aligned, but ASCAP was still siding with the publishers.

But the really damning stuff comes from the things we highlighted earlier during the trial -- and the judge found those points quite damning. There was clear collusive behavior between the publishers and ASCAP, meaning that ASCAP's claims that those "independently" negotiated deals were not done in a true marketplace. It started with ASCAP boss, Paul Williams, trying to calm down angry songwriters, but flat out admitting that these "withdrawals" were all really about getting higher rates for everyone:

The large publishers were well aware of the discomfort that
at least some writers felt with the new media withdrawals and
made the following argument to convince them to come on board:
if the major publishers could get higher license rates by direct
negotiations with new media companies outside of ASCAP then
those rates could be used in rate court litigation to raise the
ASCAP license fees. The publishers found an ally on this issue
in writer and ASCAP chairman Williams, who agreed with the new
media rights withdrawal strategy. His email illustrates the
strategy he pursued to get writers to support the publishers’
partial withdrawal of rights from ASCAP:

My job is to make this transition as smoothly as
possible in the board room . . . to assuage the fears
of the writers who may see this as an ASCAP death
knoll . . . . [W]e are in fact giving [the major
publishers] the right to negotiate. The end result
being that they will set a higher market price which
will give us bargaining power in rate court.

In other words, far from real competition and a market rate, Williams was flat out admitting that he was encouraging publishers to leave his own organization, making life more difficult for the songwriters he claims to represent, just so they could set up these sham agreements (negotiated with a gun to Pandora's head) and then pretend there was a higher "market rate" to use at the rate court.

This kind of behavior went to extreme levels, with Universal Music more or less threatening Pandora's lawyers with mafioso like claims, and then immediately emailing ASCAP folks, to talk about how the strategy of jacking up the rates was working, and how ASCAP should be strong, since Pandora was supposedly running scared and would settle quickly. This, you'll note, is not the behavior you'd see in a competitive market. It's the behavior of organizations colluding against Pandora.

The day after the
rate court filing, UMPG’s Horowitz called one of Pandora’s
attorneys at Greenberg Traurig. As Horowitz promptly
memorialized in an email to ASCAP’s LoFrumento, Horowitz

told [Pandora’s outside counsel], as a “friend” of the
firm, that I thought both the firm and Pandora are
completely tone deaf. That whether his firm has the
legal right to rep Pandora in litigation, the firm has
lost huge goodwill with writers and artists by doing
so. And that filing now for a rate court proceeding
against ASCAP . . . had the effect of unifying
artists, writers, and PROs against Pandora.

Horowitz also gave some advice to LoFrumento regarding
ASCAP’s negotiating stance with Pandora. His advice boiled down
to two words: be strong. Horowitz wrote:

My take: [Pandora’s outside counsel] and Pandora are
scared. They just want to settle with ASCAP and
settle fast. Be strong. Time is on your side.
Pandora is now under intense pressure to settle with
ASCAP. They have to put this behind them. You can
really push Pandora and get a much better settlement
as a result. They are reeling. They will pay more, a
lot more than they originally intended, to do that.

Horowitz forwarded this same email to other ASCAP board members,
including Sony’s Martin Bandier, and BMG Music Publishing’s
Laurent Hubert. Besides these ASCAP Board members, Horowitz
sent the email to David Israelite of the National Music
Publishers Association (“NMPA”), which is a music industry trade
group based in Washington, D.C. LoFrumento assured Horowitz
that he was approaching Pandora with the mindset Horowitz
advocated.

In other words, this was all a coordinated effort, rather than actual market competition. The ruling further confirms the fact, as Pandora had publicly stated, that ASCAP and Pandora had actually agreed to terms on a rate, and then ASCAP backed out of the deal, suddenly demanding much, much higher rates, leaving Pandora in a difficult spot at the last minute on some negotiations.

Either way, the judge makes it quite clear that he views ASCAP's activities as "coordinated" with the major publishers, rather than any sort of independent competitive market, as ASCAP had tried to tell the judge. Furthermore, the judge notes that the publishers, along with ASCAP, put Pandora in an impossible "gun to the head" kind of situation to agree to massive increases to the publishers, by withholding the list of songs that would soon be "infringing" if Pandora didn't agree to a much higher deal.

With only a few business days remaining in the year 2012, ASCAP refused to provide Pandora
with the list of Sony works without Sony’s consent, which Sony
refused to give. Without that list, Pandora’s options were
stark. It could shut down its service, infringe Sony’s rights,
or execute an agreement with Sony on Sony’s terms. Then,
despite executing a confidentiality agreement with Pandora, Sony
made sure that UMPG learned of all of the critical terms of the
Sony-Pandora license. And LoFrumento admitted at trial that
ASCAP expected to learn the terms of any direct license that any
music publisher negotiated with Pandora in much the same way.

[....] What is important is
that ASCAP, Sony, and UMPG did not act as if they were
competitors with each other in their negotiations with Pandora.
Because their interests were aligned against Pandora, and they
coordinated their activities with respect to Pandora, the very
considerable market power that each of them holds individually
was magnified.

The judge certainly finds Sony and ASCAP's behavior in withholding the list of songs it was withdrawing from Pandora incredibly suspect, and further that the testimony from Sony's representative was simply "not credible" on this issue.

Brodsky received this request for a list of the Sony works,
but never responded. In their telephone conversations during
the month of November, Rosenbloum reiterated the request for a
list of works on several occasions but never got any response.
Rosenbloum repeated the request once more at a breakfast meeting
that he and Pandora’s Kennedy had with Sony’s Brodsky and
Bandier on November 30. Again, Sony did not respond.

The list of Sony works was potentially important for
several purposes, and Pandora referred to those several purposes
in its discussions with Sony. In addition to wanting to be able
to remove the Sony works from its service if Pandora and Sony
could not come to terms, Pandora needed the list so that it
could understand how to apportion any payments between the EMI
and Sony catalogues since the payments would apparently be made
at two different rates. Pandora also wanted the list so it
could evaluate whether the substantial, non-refundable advance
that Sony was demanding would likely be recouped.

Sony had a list readily at hand, since the Compendium
required that a publisher and ASCAP work together during the 90
day period before the effective withdrawal date to confirm
precisely which works were being withdrawn. Sony understood
that it would lose an advantage in its negotiations with Pandora
if it provided the list of works and deliberately chose not to
do so. Brodsky’s explanation at trial that he did not provide
the list because he believed that negotiations were proceeding
smoothly and did not want to impose an unnecessary “burden” on
Sony’s staff is not credible. The negotiations were not going
smoothly; the list had already been prepared and its production
imposed no burden. As Brodsky recognized in his testimony, the
list was “necessary” to Pandora in the event the parties did not
reach a deal. Sony decided quite deliberately to withhold from
Pandora the information Pandora needed to strengthen its hand in
its negotiations with Sony.

The judge recounts how Pandora also tried to get the list from ASCAP directly, and ASCAP after conferring with Sony similarly refused to give Pandora the list. The ruling also details how when ASCAP broke the handshake agreement it had with Pandora, it basically left Pandora less than a week to come to terms with Sony or be at risk for huge liability for playing Sony songs that it couldn't remove since no one would give it a list. In other words, Pandora was given effectively less than 5 days to negotiate a deal with Sony, without even knowing the basic information it needed to know. When Pandora further asked for the list just so it could figure out how much of its music database would be covered by Sony's license, Sony again refused to give the list, but just said that about 30% of the music consisted of Sony and EMI combined.

Then there's the fact that Sony officials then leaked information about the deal terms all over the place, despite a confidentiality agreement.

By mid-January 2013, and despite the existence of a
confidentiality agreement, Sony leaked the key terms of the
Pandora license to the press. The headlines in three articles
said it all: “Sony/ATV ‘Now Has the Power to Shut Pandora
Down…’”; “Sony/ATV gets 25 percent increase in Pandora
royalties”; and “Sony/ATV’s Martin Bandier on new ‘quite
reasonable’ Pandora deal.” A New York Post article featured a
photograph of Sony’s Bandier in shirt sleeves with a large cigar
in his mouth, as it reported that Sony had “wrangled a 25
percent increase in royalties” for a one year license.

Although Brodsky denied knowing that anyone at Sony had leaked
the terms of the license to the press, the evidence is that Sony
did just that. Despite reporting dutifully that Sony had
“declined” to comment on the terms of the deal, the articles
referred to anonymous industry insiders as their source and
quoted Bandier’s analysis of the deal. While Pandora had
absolutely no interest in seeing the 25% hike in its rates known
to other licensors, Sony hoped that its rate would be a jumping
off point for the next publisher’s negotiations with Pandora,
and it was. Pandora had its attorneys call Sony to complain of
the breach of their confidentiality agreement.

The whole ruling is quite a read. It shows over and over again how ASCAP and the big publishers basically did everything possible to collude and screw over Pandora, potentially harming songwriters in the process, by giving those songwriters less clarity and less information about licensing rates and how much they were owed. The claim from Universal that Pandora would regret going to rate court doesn't seem to have come about, as it's the publishers and ASCAP itself that have come out of this whole process with a massive black eye.

from the urls-we-dig-up dept

Music is all around us, playing in elevators and on customer support phone calls that seem to take forever to reach an actual human being to speak with. People generally know the names of the singers of the songs that get stuck in their heads, but the composers are often unknown or easily forgotten. As ASCAP celebrates its 100th anniversary, we'll point out a few composers who you might not recognize.

from the incredible dept

On Thursday, ASCAP -- the American Society of Composers, Authors and Publishers -- will turn 100 years old. ASCAP was the original music collection society in the US, and over the years we've detailed just how out of touch and obsolete it has become, basically harming independent artists to help rock stars. At the same time, it has bizarrely lashed out at Creative Commons, and when Larry Lessig offered to debate ASCAP boss (and famed songwriter) Paul Williams, Williams refused while claiming it was all an attempt to silence ASCAP.

Yet, in the last few years, we've been covering the incredible and bizarre legal fight between ASCAP and Pandora, which has seen ASCAP stoop to amazing lows. You can read some of the basic background in some of our previous posts. A key part of this was that the major labels, key members of ASCAP, suddenly started "dropping out" of ASCAP in order to do licensing directly. At first we thought this was a sign of how the labels might be realizing that ASCAP was obsolete and out of touch, but it has since become clear that these "removals" were all something of a scam to force Pandora into higher rates.

What happened was that ASCAP and Pandora had first negotiated a higher rate than Pandora had agreed to in the past -- reaching a handshake agreement. However, before that agreement could be finalized, these labels started "withdrawing" from ASCAP in order to negotiate directly. As part of that, both ASCAP and the labels refused to tell Pandora which songs had been withdrawn, meaning that if Pandora accidentally played one of the withdrawn songs (again, without knowing which songs were withdrawn), it would face massive copyright infringement liability. With its back to the wall, Pandora was forced to agree to much, much higher rates with those labels who had "withdrawn" their songs -- and then those labels magically put their songs back in ASCAP... and then ASCAP claimed that those newly "negotiated" deals represented "true market" deals, and argued that in an open market, it deserved those kinds of crazy high royalty rates. Pandora pointed out that this pretty clearly violated the antitrust decree against ASCAP -- an argument that Pandora won in the first round.

The case is moving forward, and many more details have been revealed, highlighting just how slimy ASCAP and the major labels have been about this. It makes it quite clear that the "withdrawals" were never actually about the labels withdrawing their music from ASCAP, but what certainly looks like collusion to have labels "withdraw," put a gun to Pandora's head, get them to agree to massively higher rates to avoid a lawsuit, and then feed that info back to ASCAP, which would continue "managing" the songs, even though they had been "withdrawn."

This comes clear in Paul Williams' deposition. Given that all these major labels were apparently "withdrawing" all of their digital rights, you might think (1) that ASCAP would be upset since it was losing all its key labels and (2) that Williams might look at reducing the cost of his licenses, since apparently they would no longer have all these important songs. Not so. From the trial transcript, here's Pandora's lawyer explaining how Williams responded when they asked him about it at his deposition:

"Did you ever consider that ASCAP could charge a lower price and try to get more people to use the works left in ASCAP rather than have users use the higher priced EMI repertoire?"

"Answer: Never once did that occur to me."

In other words, it was all about raising the rates. It was not about competition.

On top of that, it details how, even as these labels were "withdrawing," representatives from those very same labels/publishers still sat on ASCAP's board. As for that issue of the labels and ASCAP refusing to reveal what songs were being withdrawn, more evidence has come out during the case, showing that this was all part of the plan between the labels and ASCAP. In fact, they joked about it over email, which has now come out. During the opening, Pandora's lawyer told the story of Pandora seeking information about what songs were being withdrawn by Sony.

Your Honor, by the time Pandora asked for this information on November 1st, both ASCAP and Mr. Brodsky [Sony Executive VP] had in their possession this very list. The deposition testimony from ASCAP was that this list as is could have been delivered to Pandora within 24 hours were it only to get the go-ahead from Sony to do so. ASCAP never received the go-ahead.

We cited much of the internal back-and-forth on this in our briefs... My favorite is the following exchange between Mr. DeFilippis and Mr. Reimer of ASCAP on December 19th, 2013, PX 193. You see the question being asked by Mr. DeFilippis: why didn't Sony provide the list to Pandora?

Mr. Reimer's response: Ask me tomorrow.

Mr. DeFilippis: Right. With drink in hand.

And the inference here is just incredible. This data was sitting there, your Honor, and nobody was willing to give it to Pandora.

There's a lot more in there, but it seems abundantly clear that these labels "withdrawing" from ASCAP had nothing to do with competition or market rates. It appears that it had little to do with even withdrawing from ASCAP. Instead, it seems to have been designed from the start to basically screw over Pandora, in what certainly smells an awful lot like collusion, by forcing Pandora to pay exorbitant rates or suddenly face a massive copyright liability because no one would tell them what songs were being "withdrawn" from an existing licensing agreement. Then, ASCAP and the other labels could turn around and use those "agreements" pretending they represented a "market rate" to argue for higher rates at the Copyright Royalty Board, which is supposed to try to come up with a "market rate" for various licenses (even though the high rates were supposed to have a confidentiality agreement tied to them).

Considering ASCAP's previous antitrust problems, this certainly looks... incredibly sketchy. And then it's ASCAP going around claiming that Pandora is somehow trying to game the system? The whole thing is incredible, and paints a really nasty looking portrait of the highly questionable games that ASCAP and the major labels/publishers played to try to force ridiculously high licenses on Pandora by setting up fake competition, and putting a gun to Pandora's head.

ASCAP has often come across as sleazy in the past, but the details coming out at this trial take it to a whole new level.

from the some-sense dept

The legacy recording industry's ridiculous war on Pandora has reached some really ridiculous levels, especially as ASCAP has continually tried to pretend that Pandora was trying to stiff artists. The details suggested something entirely different. After staying quiet for a while, Pandora finally highlighted the true story, which showed that the claims about Pandora were completely bogus. It was actually ASCAP who was playing sick games with Pandora, trying to remove the right to play certain songs, without even letting Pandora know which songs.

Historically, Pandora has paid essentially the same rate as all other forms of radio, a rate established unilaterally by the performing rights organizations, ASCAP and BMI, in the late 1990s. In November of last year, following a lengthy negotiation, Pandora agreed with ASCAP to a new rate, an increase over the prior amount, and shook hands with ASCAP management. Not only was our hand-shake agreement rejected by the ASCAP board, but shortly thereafter we were subjected to a steady stream of “withdrawals” by major publishers from ASCAP and BMI seeking to negotiate separate and higher rates with Pandora, and only Pandora. This move caused us to seek the protection of the rate, also recently negotiated, enjoyed by the online radio streams of broadcast radio companies. It’s important to note that these streams represent 96% of the Internet radio listening hours among the top 20 services outside of Pandora (talk about an un-level playing field). We did not enter this period looking for a lower rate – we agreed to a higher rate. But in a sad irony, the actions of a few small, but powerful publishers seeking to gain advantage for themselves has caused all songwriters’ royalties to go down. Any characterization of Pandora as being out to cut publishing rates flies in the face of the facts.

And while not highlighted there, Pandora also noted that ASCAP refused to let Pandora know which tracks were being withdrawn, leading to uncertainty over potential liability if it played the wrong track:

During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work. At Pandora’s scale, such liability would be enormous.

As we noted at the time, this appeared to be in direct violation of a long-term antitrust agreement ASCAP has with the DOJ, given ASCAP's massive market power. Some in our comments suggested it was crazy to suggest this move violated the antitrust agreement, but a court has basically ruled strongly in favor of Pandora, noting that it goes against the agreement to selectively remove songs from the blanket license, and allowing Pandora to continue to stream such songs. Basically, the court rules that the consent decree from the antitrust fight means that ASCAP can't divide up the various copyrights to separate out things like "new media rights," but rather if it has a song in its catalog, it must license it under its blanket license.

ASCAP’s argument is predicated on the Copyright doctrine of “divisibility of rights” within a copyrighted work. It is true that “[t]he Copyright Act confers upon the owner of a copyright a bundle of discrete exclusive rights, each of which may be transferred or retained separately by the copyright owner.” But while the Copyright Act allows rights within works to be alienated separately in general, [the consent decree] imposes restrictions beyond those imposed by the Copyright Act on ASCAP. [The consent decree denies] ASCAP the power to refuse to grant public performance rights to songs to particular users while, at the same time, retaining the songs in question in its repertory.

I await ASCAP's next press release insisting that Pandora is the one playing games....

from the because-reasons dept

We'd already talked about how the legacy players in the recording industry had lashed out at Pandora for buying a small radio station. As we noted, Pandora was doing this to more or less highlight the absolute hypocrisy (and possible illegality) of ASCAP who offers cheaper streaming rates for terrestrial radio stations to stream their programming online. Since this stuff gets a bit confusing, as a reminder, ASCAP (along with others like BMI and SESAC) collect and distribute money for composers and publishers, not for musicians playing the music (though, obviously, sometimes the composers also play). ASCAP has a variety of different rates that it charges for things, and Pandora noted that its online competitors, such as iHeartRadio -- which is owned by ClearChannel, the largest owners of terrestrial radio stations in the US -- pay a lower rate for online streaming.

ASCAP has been offering iHeartRadio and other terrestrial stations that also do streaming cheaper licenses for their streaming than it offers to Pandora. Pandora has argued that this violates the antitrust agreement that the DOJ made ASCAP agree to, after it was discovered that ASCAP was engaged in a variety of anti-competitive practices to restrict the market.

The hysteria over this from some less-than-well-informed folks in the music industry has really been quite incredible. Contrary to some claims that we've seen, Pandora is not trying to get a special deal. Nor is it trying to say that it doesn't have to pay performer rights (which are a whole different issue). All it's really doing is highlighting how ASCAP is discriminating against online-only streaming services by charging them different rates than online streaming services that happened to be owned by terrestrial radio stations.

Pandora is buying KXMZ for one reason – to argue that it is entitled to pay lower music
performance royalties to composers, songwriters and lyricists for its billions of online-only
internet music streams.

Actually, it seems like Pandora is buying KXMZ to demonstrate that ASCAP has discriminatory and unfair pricing practices in how it offers its licenses. It's not that Pandora is claiming that it alone is magically entitled to lower royalties -- it's pointing out that everyone else gets lower royalties and Pandora is wondering why it is singled out for higher royalties.

Honestly, that's about the extent of ASCAP's argument. Beyond that, it focuses on some procedural issues about the paperwork that Pandora filled out -- ASCAP claims they didn't follow all the rules. But, clearly, ASCAP doesn't go around making sure that everyone buying radio stations has dotted their i's and crossed their t's. ASCAP is just upset that Pandora is suddenly calling attention to ASCAP's discriminatory online streaming rates. Even on the technicalities ASCAP is being particularly ridiculous. For example, it claims that Pandora did not properly disclose its ownership, because it claims that Pandora improperly referred to Wellington Management Company as "an investment adviser" in the past, but for this document, refers to it as "an investment company." That's the sort of minutiae ASCAP is pulling out to try to block this.

The whole thing is petty in the extreme. ASCAP clearly has discriminatory pricing practices against online-only streaming companies -- and is embarrassed by Pandora making this point very clearly by purchasing this tiny radio station. Is it a move to "game" the system? Yes, it is but a move necessitated by ASCAP's discriminatory pricing. If ASCAP is so upset about this, perhaps it shouldn't have priced internet streaming differently depending on whether or not you own a radio station.

from the really-now? dept

The ability of the record labels and RIAA front groups to flat out lie about the internet is really quite incredible. There's been some buzz recently about the crazy fact that Pandora just bought a small terrestrial radio station in South Dakota. Now, you might wonder, why would an innovative company that basically seems to be focused on making terrestrial radio stations obsolete need to own such a station... and Pandora is rather upfront in its answer: because the music collections societies, like ASCAP and BMI discriminate against internet companies, in direct violation of an antitrust agreement that ASCAP signed. Furthermore, ASCAP not only won't offer Pandora the same rights, but it engaged in highly questionable negotiation practices, such as refusing to tell Pandora what songs it was pulling the rights to, such that Pandora risked huge statutory awards for copyright infringement:

During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work. At Pandora’s scale, such liability would be enormous. Faced with such potential liability, Pandora negotiated an agreement that resulted in increased rates. Shortly thereafter, additional major publishers took steps to withdraw their catalogs from ASCAP, again with respect to Pandora.

ASCAP created additional ways to circumvent its antitrust consent decree. Our motion also describes how ASCAP refused to provide Pandora a license under the same terms as the iHeartRadio service, for only one reason: iHeartRadio is owned by a terrestrial broadcaster.

All of this is in direct violation of the antitrust agreement ASCAP has with the DOJ, in which it's supposed to make sure that ASCAP can't use its monopoly power over compositions to discriminate against certain players. Yet, ASCAP is clearly trying to discriminate against internet streaming services, by charging them significantly higher rates.

This is a perfect example of the twisted incentives and strange results we get from a music licensing system that is based on who wants a license instead of just what they want to do with the music they’re using. This makes no sense. The law should treat like uses alike. Regardless of how high or low you think performance royalty rates for webcasting should ultimately be, there is no logical reason to give preferential rates to certain companies just because they arrived at the negotiation table first.

And this is only about composition rates, not even getting into the rates that Pandora has to pay for sound recordings, which is infinitely higher than terrestrial radio. Buying the radio station won't help on that front, because the internet streams are charged differently than terrestrial radio no matter who owns it, but just the fact that it's paying different rates than everyone else seems ridiculous.

And, of course, the incumbents try to twist all of this. First up, we see that BMI has sued Pandora for buying the radio station. I'm not joking. I can't see on what possible grounds a lawsuit would make sense. Are they saying it's illegal for a company to seek to get the same rates that BMI offers radio stations?

But, even worse than that is the reaction of the RIAA front group, MusicFirst, a lobbying group set up by the RIAA and SoundExchange solely for the purpose of lobbying against internet companies and seeking ever higher rates for those companies, to make sure no internet music company can stay in business. That this is short-sighted and stupid never seems to occur to MusicFirst, who is always quick with a blog post arguing that internet companies are up to no good. In this case, it accuses Pandora of playing a "sick joke" in making this purchase:

This has to be some kind of sick joke. Pandora bought an FM radio station to game the system in order to pay songwriters less?

Pandora continues to find new ways to give artists and songwriters a raw deal from the bottom of the deck. In their race to the bottom to see how little they can pay music creators, they have stooped to misleading legislation, bait and switch petitions, and now fronting as an FM radio station.

Oh really now? It's a "sick joke" to try to get the same license rate that ASCAP and BMI offer terrestrial radio stations? How so? It's a "sick joke" that the company doesn't think it's fair for ASCAP and BMI to discriminate against internet streaming radio services? The only "sick joke" is MusicFirst pretending to represent artists as it seeks to kill off new and innovative internet services that are helping artists build bigger fan bases. No wonder the RIAA-funded MusicFirst has to resort to silly claims like this. The RIAA has never wanted to adapt to an internet world, and is, once again, looking to spread completely bogus propaganda in an attempt to stifle internet progress, which tends to help independent artists, such that they don't need the RIAA labels any more. What's incredible is that the RIAA, which set up MusicFirst, has it pretend to represent the interests of "artists" when it's never been anything more than a big-label front group. If there's any "sick joke" it would be MusicFirst's pretend concern for artist's rights, that just so happen to align entirely with the interests of the big labels.

David Israelite, CEO of the National Music Publishers Association (NMPA), tonight interrupted his state-of-the-industry speech at the group's annual meeting in Manhattan to lash out at Pandora's decision to acquire a radio station in South Dakota. "Pandora is going to pursue lawsuits and gimmicks," Israelite told the hundreds of songwriters and composers in attendance. "Pandora is hoping to fraudulently sneak in the back door. Any shred of credibility that Pandora had is gone. They are at war with songwriters "

Once again... huh? Asking for the same rates that radio pays to stream music online is "going to war"? How does that compute? It's as if the music publishers, collection societies and the RIAA can't help but lie because they have such distaste for Pandora actually figuring out a service that people like online, when they've spent so many years trying to ensure that online services fail. If there's any "war" going on here, it's the legacy recording industry against online services that fans seem to love.

from the footloose? dept

The Copyright Board of Canada, which reviews copyright tariffs for various collection societies (like ASCAP and BMI in America, which collect performance licensing fees from venues) has just approved a new set of fees to cover recorded music at a bunch of different live events. Karaoke bars, conventions, parades, weddings and several other classes of event—which already pay fees to SOCAN, which represents songwriters—will now begin paying additional tariffs to collection society Re:Sound, which represents recording artists and labels.

We've talked a lot about the problems with the whole idea of the collection society structure in the past, especially the fact that most societies are constantly pushing for higher fees and trying to extract money for ridiculous things, even though they have a poor track record of actually redistributing the money they collect to the artists they supposedly represent. But of course, the people behind the tariff talk it up as a boon for small musicians:

"We are trying to establish tariffs for the remuneration of everybody involved in the music — everybody that has some rights to receive some remuneration," said Gilles McDougall of the Copyright Association of Canada, adding that the tarriff will likely result in a few million dollars a year for performers.

Re:Sound spokesman Matthew Fortier said the money collected will make a big difference to small operations.

"Sometimes you think of the larger artists or record labels, but most often it goes to small, struggling artists and record labels — we have thousands signed up with us," he said.

But as Howard Knopf points out, small artists are the last ones to get anything out of a scheme like this. Megastars and their labels can make money—but even that pales in comparison to the real beneficiaries of the tariff:

Sadly, very little of this money through gets to the artists that need it the most. This is because the copyright collective system tracks and rewards commercial success. Celine Dion, U2, Lady Gaga and their record and publishing companies do very well by the this system but emerging creators see very little of this money. The ones who really and consistently benefit the most are those who run the collectives, those who are consultants to the collectives, and the lawyers who punctually pursue new and higher Copyright Board tariffs using money raised from the previous tariffs and paid for ultimately by the Canadian public. Many if not most Copyright Board hearings generate millions of dollars in legal fees in order to generate average annual payments to creators that are typically much less than a junior lawyer’s hourly rate.

As with many such licensing schemes, the specifics of the fees seem almost completely arbitrary. Karaoke bars pay a rate based on nights-per-week, parades pay a different rate per-float, and weddings pay a third rate that for some insane reason gets doubled if the wedding involves dancing.

Some people will look at the fees themselves, which in any singular instance only generally add up to a few hundred dollars at most, and ask what the big deal is. But that's ignoring the big picture: Canada loves copyright tariffs, and each one serves to shift massive amounts of wealth around, often with little justification and no way of ensuring that the money is being properly distributed. And we just keep piling new tariffs on top of old ones, with no clear idea of how effective they are—except at funnelling money to the collection societies:

It’s true that most people do not tend to get married very often. And many weddings cost $25,000 or more. So, some may not be too concerned about the macro or even microeconomic aspects this particular tariff item. It won’t likely harm Canada’s economy overall or even the institution of marriage.

But these little tariffs add up. The little tariffs such as $0.29 for a blank CD or $5.16 per year for each K-12 student, or $253.45 for a wedding soon add up to about $500 million a year in Canada. One is tempted to say that "A half billion here, a half billion there, pretty soon, you're talking real money." Copyright Board tariffs siphon huge sums out of the educational system, the broadcasting and telecom industries, businesses of all kinds that use blank media for ordinary data storage and transfer purposes, etc.

Now we can add this one to the bloated list. And you can guarantee it won't be long before Re:Sound is back before the Copyright Board, pushing to raise the fees and expand the tariff to new classes of events and venues. Copyright tariffs rarely decrease—even when they absolutely should.

from the well,-here's-a-shot dept

In the US we have three main music collection societies for performance rights (ASCAP, BMI and SESAC), and then SoundExchange for satellite/online streaming. However, many other countries just have a single collection society, with somewhat monopolistic tendencies. There have been efforts (mostly failed) to create more competition in Europe, mainly by encouraging the organizations to leave their local country and work across Europe. There have been precious few new entrants, however. At least one group is trying to change that -- and they're doing so by embracing the internet and the concepts of free culture. C3S, or the Cultural Commons Collecting Society is trying to enter the market in Europe in a much more culture-friendly manner:

C3S is a collaborative effort to found a new and ground-breaking European collecting society for musical creators to register their works outside of traditional schemes, released under free licences for commercial exploitation. More than just for works published under Creative Commons Licences, C3S is open for other free licences as well.

The new operation wants to encourage free distribution for non-commercial use, and a much more reasonable (and appealing) deal for both musicians and consumers. Just the fact that the organization has to make it clear that members are encouraged to make use of free licensing is an amazing step forward. Compare that to organizations like GEMA that have tried refusing to recognize Creative Commons licenses, and operations like ASCAP, who insist that Creative Commons is threat to musicians, rather than a useful tool. Who knows if C3S will go anywhere, but it's nice to see that it's at least being tried.